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oksian1 [2.3K]
3 years ago
14

Mr. A, a cash-basis taxpayer, sold his business in the current year for $120,000. The contract allocated $40,000 to inventory an

d $80,000 to real property. The book value of the inventory was $38,000. The real property had a cost of $40,000 and depreciation claimed on a straight-line basis was $20,000. In the current year, Mr. A received a down payment of $60,000 of which $40,000 was payment for the inventory. Mr. A had no other Sec. 1231 transactions. What is the amount and nature of the gain that Mr. A should report in the current year using the installment method?
Business
1 answer:
Leona [35]3 years ago
4 0

Answer:

$2,000 ordinary gain and $15,000 long term capital gains

Explanation:

Under the installment method, the taxpayer will recognize gains based on the installments that they actually receive, not the whole contract. This method is generally used for real estate transactions that involve installments payments during several years.

In this case, Mr A received $60,000:

$40,000 for inventory, so gain = $40,000 - $38,000 = $2,000 ordinary gain

$20,000 for real property (25% of transaction price) = $20,000 x [($40,000 - $20,000) x 25%] = $20,000 - $5,000 = $15,000 long term capital gains

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Answer:

Yes, the US airline Industry is attractive. Southwest Airline's has a unique business model with an efficient operational strategy.

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The most important strategic choices for Southwest Airline is a low-cost operational structure that achieves high returns on capital due to a unique

The unique thing about southwest strategy is, the company has good credit rating which has positioned them strategically compared to its competitors.

The components of Southwest's strategy that are VRIO is as follows

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The threats they are likely to face include

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The first step in marginal analysis is to determine
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